Market Analysis and Feasibility Flashcards
7 cards from real Real Estate Investing practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Market Analysis and Feasibility flashcards as text
What is the main purpose of analyzing 'days on market' (DOM) data in a specific submarket?
Answer: To gauge how quickly properties are selling and assess market momentum
Days on market data reveals how fast properties are selling, with lower DOM indicating strong demand and higher DOM suggesting a slowing market.
Which of the following best describes a 'tertiary market' in U.S. real estate investing?
Answer: A smaller city or rural area with limited institutional investment activity
Tertiary markets are smaller cities and rural areas with less institutional investor activity, offering potentially higher yields but greater liquidity risk.
An investor conducts a highest and best use analysis. Which of the four tests must a use pass to qualify?
Answer: Legally permissible, physically possible, financially feasible, and maximally productive
Highest and best use requires a use to be legally permissible, physically possible, financially feasible, and maximally productive among competing uses.
When analyzing supply pipeline in a market, which data point is most forward-looking?
Answer: Building permits issued
Building permits represent future construction activity and give investors the best indication of upcoming supply that will compete with existing properties.
A market analysis reveals strong in-migration from expensive coastal cities. For a rental investor, this most likely signals:
Answer: Rising rental demand and potential rent growth
In-migration from higher-cost areas typically brings renters who can afford above-average rents and drives demand in the receiving market.
What is the primary weakness of using the gross rent multiplier (GRM) for market feasibility analysis?
Answer: It ignores operating expenses and vacancy, providing an incomplete picture of profitability
GRM only divides purchase price by gross annual rent, ignoring vacancies, taxes, insurance, and maintenance, which can vary significantly between properties.
In evaluating a market for multifamily investment, which indicator best predicts future rent growth?
Answer: Job growth outpacing new housing supply
When job growth brings new residents faster than new housing supply can be built, demand-supply imbalance creates upward pressure on rents.